Knowledge as Currency: The Lasting Partnership of Bulgaria and the World Bank Group

When the World Bank Country Office in Bulgaria opened on April 1, 1992 the country was balancing large aspirations with many economic and social difficulties. Hopes for freedom rose amidst great challenges. The centralized economy of Bulgaria, which focused on heavy industry, had lost its markets virtually overnight. Energy supplies were cut and the economic turmoil created in the aftermath of the fall of the Berlin Wall had saddled Bulgaria with a major external debt problem and a sagging economy.  Despite these challenges, however, hope – for freedom of speech, freedom of movement, and freedom of travel – still sprang forth.

While hope dominated during this historic moment, few – if any – could have envisioned the extraordinary economic, political, and social strides this country would make over the next two decades.   Ongoing strategic engagement with international partners and the implementation of a prudent reform agenda over these years has allowed Bulgaria to overcome various hurdles - transforming from a fledgling market economy to an upper-middle income member of the European Union (EU) in just two decades.   

Constant engagement with its international partners has been a cornerstone of Bulgaria’s successes over the last 20+ years. The prospect of joining the European Union and strengthening its role in the global community spurred a national consensus to follow this ambitious path. These hopes for increased international integration in the global economy were soon realized – first in 2004, when Bulgaria joined the North Atlantic Treaty Organization, and then in 2007, when the country joined the EU.

Throughout all these changes, the World Bank Group constantly engaged with Bulgaria – forging a solid partnership through good times and bad. When hyperinflation erupted in Bulgaria in 1997, the World Bank - in close coordination with the IMF - provided much needed financial support for the necessary structural reforms which were put in place as a response. When Bulgaria joined the EU, the World Bank celebrated alongside all of Bulgaria's international partners. 

Starting with an initial $17 million Technical Assistance for Economic Reform Project, the World Bank Group has remained a firm development partner, committing over $9 billion to Bulgaria over two decades – including 44 operations, 24 investment loans, four Global Environmental Fund (GEF) grants and two World Bank-managed Prototype Carbon Fund (PFC) operations.

As the country evolved so too did this strategic partnership. Sustained economic growth, followed by the accession of Bulgaria into the EU in 2007, has allowed for a marked shift to occur in the country’s engagement with its international partners - from macroeconomic stabilization and structural reform to knowledge and advisory support. During this time the role played by the World Bank has transformed from one of premiere financier to that of a knowledge partner supporting Bulgaria in making the most from existing EU funding. 

Bulgaria’s Country Partnership Strategy (CPS), in place since 2011, has altered the focus away from traditional lending operations toward a more knowledge-oriented partnership. This new strategy  envisages knowledge support for smart, sustainable, and inclusive growth in Bulgaria in line with the Europe 2020 agenda and National Reform Program. The CPS also commits knowledge support to Bulgaria in speeding up the absorption of available EU funding – a task being implemented in conjunction with other international partners, including the European Commission, and the European Investment Bank.   

The signing of a Memorandum of Understanding (MoU) in January of 2012 further reinforced this strategic call for an improved knowledge partnership between Bulgaria and the World Bank. This MoU sets the stage for Bulgaria’s new priority engagement with International Financial Institutions and builds on a mechanism that allows the Government to draw on EU Funds to cover the costs of knowledge and advisory services of the European Investment Bank, and the European Bank for Reconstruction and Development, and the World Bank.

“This MoU is a major milestone in the World Bank’s longstanding relationship with Bulgaria as we move away from a traditional cooperation to one that delivers tailored knowledge and advice to support Bulgaria’s European agenda,” said World Bank Vice President for Europe and Central Asia Philippe Le Houérou at the ceremony in January.

The shift toward a new and unique knowledge partnership between the World Bank and the Government of Bulgaria was highlighted in practice by the signing of three reimbursable advisory service agreements in July and October 2012 – providing advisory services for the development of the National Strategy for Water Supply and Sanitation, the “Smart Specialization Strategy” for Innovation, and the roads sector development.

“The World Bank has been partnering with Bulgaria over the last 20 years and we are glad to see how the government was able to translate its commitment to roads infrastructure into many kilometers of new roads and highways. Through our new partnership we will be glad to contribute with knowledge and ideas on how to make the best use of the assets developed and to develop new infrastructure,” said World Bank Regional Director for Central Europe and Baltic Countries Peter Harrold during a signing ceremony in October 2012.

Recognizing the benefits of this new partnership, Bulgaria has adopted a “Knowledge is the Currency” platform to help inform this new partnership with the World Bank on EU funds. This platform has become the guiding principle to help Bulgaria transform nearly €7 billion in EU funds into better public infrastructure and services. This increased knowledge role of the World Bank in Bulgaria seems to be well received by many of the key stakeholders across the country. According to a country survey conducted in the summer of 2012, the World Bank’s greatest value to Bulgaria is in its knowledge provision, followed by its financial resources – a direct reversal of responses just five years ago. The respondents also endorsed this new knowledge agenda by giving a mean rating of 7.9 out of 10 on the quality of the knowledge and research being generated by the World Bank. Looking toward the future, more than 43% of the respondents said they would like the World Bank to offer more of its innovative knowledge services.

In addition to stakeholder recognition of this new knowledge partnership, the Independent Evaluation Group (IEG) of the World Bank Group also noted the relevance of this new role. 

“In the future,” notes a recent statement by IEG Director General Caroline Heider, “the World Bank’s challenge will be to foster development results independently of lending, through knowledge services that support Bulgaria to converge with EU standards through the implementation of the Europe 2020 strategy.”

This knowledge partnership represents a new era of cooperation between Bulgaria and its international partners, laying the foundation for bold new initiatives which will shape the economic and social future of Bulgaria, as well as other countries. This partnership represents a true knowledge exchange, with Bulgaria offering renewed guidance for engagement by the World Bank in other countries. If the extraordinary steps taken by Bulgaria over the last 20 years serve as any sort of indicator, many successes lie ahead for Bulgaria.